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EU-Vietnam Free Trade Agreement In Force

The Free Trade Agreement between the EU and Vietnam, abbreviated EVFTA, entered into force on 1 August 2020. It is the EU's second free trade agreement in the ASEAN region after the agreement with Singapore. The 1400-page text of the agreement was published in the Official Journal of the European Union L 186 in the official EU languages on 12 June 2020.

Both sides expect a significant growth in trade between the EU and ‑ with a population of almost 100 million ‑ the third largest ASEAN country, after Indonesia and the Philippines. It is therefore worth examining whether and what advantages the Agreement offers. The following overview and the Guide by the Delegation of the European Union to Vietnam, as well as the Commission's website provide details.

Trade in Goods

The biggest improvement of the current situation is the reduction of tariffs, with tariff reductions being partly immediate, but for virtually all products gradually over a seven to ten-year transitional period, until 99 percent of all tariffs are eliminated altogether, see Chapter 2 of the Agreement. Depending on the importance of a product or category of products, tariffs are eliminated more or less quickly. More than 60 percent of mutual exports can be imported duty free immediately. Consequently, almost all EU exports of machinery and appliances into Vietnam will be fully liberalised at entry into force of the FTA. For the automotive industry, customs duties will be gradually removed over the next ten years for passenger cars. Car parts will be duty free after seven years. In addition, 70 percent of EU chemicals exports will no longer be subject to customs duties in Vietnam with immediate effect.

The customs duties apply to goods manufactured in the respectively other customs territory. The UK will no longer be part of the Agreement from January 2021 unless further agreements are concluded. The rules of origin of the Agreement are based on the EU rules of the Generalised System of Preferences (GSP) towards developing countries. However, the sometimes detailed rules must be strictly observed and the origin of a product must be proven, in the best case by means of the simplified self-certification procedure for registered exporters.

With regard to the discussion on supply chains, manufacturers and traders will be pleased to note that Vietnam has undertaken to ratifying and implementing fundamental conventions of the International Labour Organisation, banning child and forced labour, and implementing further regulations on climate, species and environmental protection.

Government Procurement

Another benefit for European companies is that they are given better access to public procurements. This is particularly important because Vietnam is making great efforts to improve its infrastructure. For details, see Chapter 9 and the Annexes to the Agreement.

Services

Under the Agreement, Vietnam undertakes to substantially improve access for EU companies to many service sectors, including environmental services, postal and courier services, banking, insurance and maritime transport. It also includes a provision allowing for a later integration into the EU-Vietnam Free Trade Agreement of further liberalisation agreed in future trade agreements with other countries. For details, see Chapter 8 and the Annexes to the Agreement.

Investments

In addition to the rules on investment in Chapter 8 of the FTA, an investment protection agreement was signed in Hanoi on 30 June 2019. The investment protection agreement must first be ratified by all member states in accordance with their respective national procedures before it can enter into force. Only after ratification will it replace the bilateral investment agreements currently in place between 21 EU Member States and Vietnam.

Dr Rainer M. Bierwagen

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Freihandelsabkommen EU Vietnam

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Dr. Rainer Bierwagen T   +32 2 6390000 E   Rainer.Bierwagen@bblaw.com